Ford Motor Co. (F) posted earnings per share of 26 cents in the fourth quarter of 2014, lower than 32 cents earned in the fourth quarter of 2013 (all excluding special items). With this, earnings surpassed the Zacks Consensus Estimate of 22 cents.
Pre-tax income declined 15% to $1.12 billion from $1.32 billion in the fourth quarter of 2013. Net income decreased to $52 million or 1 cent per share from $3.07 billion or 75 cents a year ago. Net income includes pre-tax special item charges of $1.2 billion in fourth-quarter 2014 and $311 million in fourth-quarter 2013, along with favorable tax special items of $2.1 billion in fourth-quarter 2013.
Revenues in the fourth quarter of 2014 fell 4.5% to $35.9 billion, exceeding the Zacks Consensus Estimate of $34.1 billion.
2014 Results
Ford reported earnings of $1.16 per share in 2014, down from $1.63 per share in 2013. Earnings per share surpassed the Zacks Consensus Estimate of $1.11.
Net income decreased to $3.2 billion or 80 cents per share from $7.2 billion or $1.77 a year ago. Net income for 2014 includes pre-tax special item charges of $1.6 billion. Net income for 2013 includes pre-tax special item charges of $1.9 billion and favorable tax special items of $2.1 billion.
Revenues decreased 1.9% to $144.1 billion from $146.9 billion in 2013, exceeding the Zacks Consensus Estimate of $136.4 billion.
Ford launched a record 24 vehicles globally in 2014. Some of the noteworthy launches include the new F-150, Mustang, Escort, Ka, Transit and Lincoln MKC
Ford Automotive
Revenues in the segment declined 5% to $33.8 billion in fourth-quarter 2014, on the back of unfavorable exchange, a 2% fall in wholesale volumes to 1.58 million units and weakness in all business units. The decline in volume reflects lower volume in North America. Pre-tax profit declined to $713 million from $963 million a year ago.
In North America, revenues went down 5% to $20.9 billion on a 5.9% decline in wholesale volumes to 700,000 units. The volume was affected by lower market share and lower dealer stock increases compared with the fourth quarter of 2013, which offset the impact of higher industry volumes. Further, pre-tax profit was down 14% to $1.5 billion.
In South America, revenues declined 9% to $2.5 billion due to unfavorable exchange, volumes and mix, which offset the net pricing gains. Wholesale volumes declined 2% to 132,000 units, reflecting lower industry sales due to import restrictions in Argentina and the weakness in the Brazilian economy. Pre-tax loss amounted to $187 million compared with $126 million in the fourth quarter of 2013 due to higher warranty costs.
In Europe, revenues decreased 2% to $6.8 billion due to unfavorable exchange, although wholesale volumes increased 5% to 323,000 units. The increase in volumes was attributable to higher industry volumes and favorable dealer stock changes. The region had a narrower pre-tax loss of $443 million compared with $529 million a year ago due to favorable market factors.
In the Middle East & Africa segment, revenues fell 2% to $1 billion on a 10% decline in wholesale volumes to 44,000 units. The decline in volumes resulted from the unfavorable change in dealer stocks. The region reported a pre-tax loss of $82 million, compared with a pre-tax loss of $104 million a year ago.
In the Asia Pacific region, revenues fell 9% to $2.6 billion, on the back of lower volume from consolidated operations and unfavorable exchange. Meanwhile, wholesale volumes increased 2% to 381,000 units on the increase in industry volumes, which offset the decline in market share. Market share in the region went down 0.1% to 3.5%. In China, Ford’s market share inched down 0.1% to 4.3%.
The Asia Pacific region reported pre-tax profit of $95 million, down from $109 million in the year-ago quarter. The deterioration was due to higher warranty costs.
Ford’s Other Automotive – consisting primarily of interest and financing-related costs – revealed a pre-tax loss of $218 million, compared with $187 million in the year-ago period.
Financial Services
Revenues in the segment rose 5% to $2.1 billion. Ford Credit reported a 15% surge in pre-tax profit to $423 million in the fourth quarter.
Financial Position
Ford had cash and marketable securities of $21.7 billion as of Dec 31, 2014, down from $25.1 billion as of Dec 31, 2013. However, Automotive debt decreased to $13.8 billion as of Dec 31, 2014 from $15.7 billion as of Dec 31, 2013.
In 2014, the company’s cash flow from continuing operations increased to $8.8 billion from $7.7 million a year ago. Automotive operating-related cash flows fell to $3.6 billion from $6.1 billion a year ago. Capital expenditures increased to $7.4 billion from $6.6 billion in 2013.
2015 Guidance
Ford affirmed the pre-tax profit guidance, excluding special items, in the range of $8.5 billion to $9.5 billion for 2015. This is substantially higher than $6.3 billion recorded in 2014 as Ford expects better results from all five geographic segments this year. Automotive revenues, operating margin and operating-related cash flow are also expected to be higher than 2014. The automaker intends to launch 15 new global vehicles in 2015.
Ford estimates 2015 pre-tax profit in North America to be higher than the 2014 level of $6.9 billion and operating margin to range from 8% to 9%, compared with 8.4% in 2014. Ford expects to report significantly better results from South America this year compared to the loss of $1.16 billion in 2014.
In Europe, Ford expects better results than the loss of $1.06 billion in 2014. In the Middle East and Africa unit, Ford expects to record losses in 2015. In Asia Pacific, Ford guides pre-tax profit to be higher than the 2014 level of $589 million.
Moreover, the automaker expects that Ford Credit’s profits in 2015 will be in line with or higher than the 2014 level of $1.85 billion.
Other Stocks to Consider
Ford currently carries a Zacks Rank #3 (Hold). Better-ranked automobile stocks include Tesla Motors, Inc. (TSLA), PACCAR Inc. (PCAR) and Toyota Motor Corporation (TM). All these stocks carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment